CFA Level I · CFA Level I Exam · Alternative Investment Features, Methods, and Structures
In a typical limited partnership structure used for private alternative investments, which party is most likely to bear unlimited liability and make the day-to-day investment decisions?
The general partner. In a limited partnership, the general partner manages the fund, makes investment decisions and has unlimited liability, while limited partners are passive and liable only up to their capital commitment. Administrators are service providers and carry neither role.
- AThe general partnerCorrect
- BThe limited partners
- CThe fund's administrator
Explanation
The general partner manages the partnership and has unlimited liability for its obligations. Limited partners are passive investors whose liability is capped at their committed capital. An administrator provides services and does not take investment decisions or partnership liability.
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